Donald Trump’s suggestion of a 45% tariff on Chinese imports to the U.S. would lead to an 87% decline in them, and over time due to multiplier effects, such a decline would translate into a 4.8% GDP loss, report analysts at Daiwa Capital Markets. Kevil Lai and Olivia Xia point out in their August 18 research piece titled “What would a Trump presidency mean for China?” that Trump thinks the playing field between China and the U.S. is not even.

U.S. tariff would impact China’s exports, GDP and FDI

During his Republican debate, Trump bemoaned how foreign countries were taking advantage of the US.

Drawing reference to Donald Trump’s stance on China, wherein he suggested a 45% tariff on Chinese goods as a main tool to narrow the U.S.-China trade deficit and restore American jobs, the Daiwa analysts point out that tariffs would increase import prices. Lai and Xia believe that depending on various substitution factors, the U.S. would most likely import less from China. The analysts argue that China would suffer more than the U.S. because of its higher exposure to exports and FDI.

Highlighting their analysis on the topic, the Daiwa analysts point out that other things being equal, a 45% tariff would lead to an 87% decline in Chinese imports for the U.S. The analysts believe that over time thanks to multiplier effects, such a decline would translate into a 4.8% GDP loss.